Bitcoin’s Arrival In The Institutional Market – What It Means In The Long Run

Ever since Bitcoin was created in 2009 by Satoshi Nakamoto, it has largely been pushed aside by the traditional financial services industry and the institutional space. A similar attitude has been displayed towards most cryptocurrencies and digital assets, based on fear and the fact that very little was known about these new “actors” in the industry. Now that they are gaining traction and have received the attention of millions of investors, lawmakers and governments are beginning to address the question of regulation for these virtual currencies.

This war between the institution and the new wave of digital assets has been going on for years. However, it seems like we are noticing a shift in mentality and approach from the institutional space towards bitcoin. More and more financial organizations are changing their opinion about the first-ever virtual peer-to-peer currency and have developed interest in these new forms of potentially lucrative investments for their loyal customers.

In this brief overview, we will see how the tide is turning for bitcoin and how it is becoming one of the most sought-after assets by large and reputable financial firms all across the globe. In turn, we will demonstrate how this could eventually lead to the crypto markets regaining their strengths and how we might be on the cusp of one of the largest bitcoin bull runs in history.

Bitcoin & Institutional Investors - The SEC, ETF's and More

Some recent events and news have been very positive for bitcoin and its slow but steady breakthrough within the institutional space. Institutional investors refer to large entities such as banks, hedge funds, insurance companies, investment groups and more. The first major news that has been affecting the space as of recently and that showcases bitcoin’s growing position within the institutional markets is the upcoming (and recently delayed) decision by the U.S. Securities and Exchange Commission (SEC) regarding the approval of a bitcoin exchange-traded fund (ETF).

An ETF is a fund that represents an asset’s value and that is traded directly on the stock market. They are considered passive investments.

In the recent weeks, the cryptocurrency community, as well as actors in the institutional space and even some members of the SEC, have been strongly advocating for the creation of a bitcoin ETF. This truly shows that there is a heavy desire from financial firms and large investors to join the cryptocurrency trend.

Another recent report by Forbes has stated that the Northern Trust, a financial services firm that has close to $10.7 trillion in assets under custody, has opened their doors to companies involved in the crypto space. In addition, the firm is supporting multiple blockchain-based projects. Moreover, Northern Trust’s President, Pete Cherecwich says he believes in a tokenized economy and future.

The Launch Of 'Bakkt' - A Global ecosystem for digital assets

The Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, has announced that it will be launching a new company called Bakkt which aims “to create an open and regulated, global ecosystem for digital assets”. It will enable big organizations to purchase, sell, and safely store virtual currencies and other decentralized assets. With large companies such as Microsoft and BCG involved in the project, this shows how blockchain-based applications and crypto-assets are gaining in popularity and are making their way through various industries. The ICE also plans to initiate a one-day physical bitcoin futures contract when Bakkt launches.

NBER Analysis - Cryptocurrency Forecasts

Furthermore, the National Bureau of Economic Research (NBER) recently published a 70-page-long report on the “Risks and Returns of Cryptocurrency”, analyzing three major coins: bitcoin, ripple, and ethereum. The fact that this paper is being published already shows that cryptocurrencies are actively being discussed by institutional investors. The NBER explains a “strong time-series momentum effect and that proxies for investor attention strongly forecast cryptocurrency returns”. The report even goes as far as recommending investing in digital currencies with “1 or 4 or 6 percent in bitcoin”.

First Cryptocurrency Index Fund?

Lastly, popular cryptocurrency exchange Coinbase has recently announced the launch of the Coinbase Index Fund. It allows institutional investors, with a minimum investment of $250,000, to place money and bet on the performance of the Coinbase Index. The Coinbase Index is composed of all the coins listed on the American giant’s platform. We clearly see that the desire to invest in cryptocurrencies is not strictly one-sided, but that the crypto space is also eagerly waiting for these institutional investors.

Long Term Upward Trend

As many have said over the last months, institutional money is on its way and it could be extremely positive for bitcoin and its value. Although the markets have been experiencing bearish trends and severe downturns in the past months, bitcoin and other major cryptocurrencies such as ethereum, litecoin, or ripple still show a lot of potential for growth and progress. With all the new excitement and innovations in the crypto space, in addition to the institutional investors finally joining the movement, the market has a lot to look forward to. Banks, financial organizations, hedge funds, and large investors are now less hostile towards these new digital assets, which are nothing short of programmable money. Coins and tokens have become more attractive and offer incredible potential, and institutional investors are aware of it.

Bitcoin & The Institutional Market - Summing It Up

In conclusion, there has been a shift in the way digital currencies, especially bitcoin, are viewed in the institutional space. Previously considered scams, frauds, and even fake, they are now starting to be looked at as real financial assets with considerable potential and upside. In this article, we have seen that numerous events have cemented the belief that opinions are changing, and so has the place of bitcoin in larger investors’ hearts. As a result, we can probably assume that the crypto markets will be positively impacted by the increase of institutional investors in the near future.

About the Author

​Mati Greenspan

Market Analyst @eToro

Senior Market Analyst at eToro; a man very up-to-date with the goings on of the Crypto markets. Follow him on twitter and other mediums at the links below.

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About the author

Mati Greenspan

Mati Greenspan is a Senior Market Analyst at eToro; a man very up-to-date with the goings on of the Crypto markets. Follow him on twitter and other mediums at the links below.